LIBERALISATION, PUBLIC INTEREST AND INDIAN CONSTITUTION

Author(s): L. Viswanathan and R.V. Anuradha

Source: Journal of the Indian Law Institute , July-September 1994, Vol. 36, No. 3 (July-
September 1994), pp. 378-382
Published by: Indian Law Institute

Stable URL: https://www.jstor.org/stable/43952352

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 LIBERALISATION, PUBLIC INTEREST AND
INDIAN CONSTITUTION

I Preface

WE LIVE in an era of transition today. Transition is the essence of developm

The world is changing fast and witnessing the re-definition of economics
relationships between people and nations of the world. It is necessary to en
that this change is not a step towards self-destruction. Protecting our pe
cannot be limited to protecting our land but should also include protection
our resources: labour, technological, natural, social and cultural. And above
it is necessary to ensure that the change being initiated is in conformity with no
of the Indian Constitution: the fundamental law of the land.
The Indian Constitution is a living document. The full import and meaning of
its words can be appreciated only when considered in relation to the vissicitudes
of fact which from time to time emerge. But the basic value choices remain. It can
perhaps be best described as a document which, while upholding and protecting
individual interest in the form of fundamental rights guaranteed against the state,
envisages a positive role for it in ensuring realisation of these basic rights by every
individual. In other words, the fact that an individual has a right would mean the
state has a duty not to interfere with it. Further, the state of this proposition can
perhaps be best explained in terms of Rawťs first principle of justice that each
person is to have an equal right to the most extensive, total system of equal basic
liberties compatible with a similar system of liberties for all.1 This principle can
be further elucidated as follows:

The purpose of legitimate politics, or government, is to secure and

protect, for each human being, as much health and freedom as is compat-
ible with equal health and freedom for all other human beings.2

It cannot, therefore, be disputed that the government has a positive role to

play. The Indian Constitution recognised this when it discarded the notion of a
mere 'police' role for the state, and instead endowed it with a positive, 'welfare
State' role.
It is in this context that we seek to examine the subject of this paper-
liberalisation and emergence of transnational corporations as major world actors.
The basic premises on which this paper is based are:
(0 The Government of India has built the country's industrial capacity over
a period of time by measures geared towards supporting domestic
concerns.

1. John Rawls, A Theory of Justice 302 (1971).

2. Christian Bay, "Universal Human Rights Priorities", in Jach Donnelly
Human Rights Priorities : Contemporary Issues 6 (1989).

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1994] LIBERALISATION, PUBUC INTEREST AND INDIAN CONSTITUTION 379

(ii) It is a matter of policy for the Indian legislature to decide whe

dismantle the system of strict controls over growth of industri
encourage the incoming of foreign competition. It may be necess
be able to stand upto foreign competition, but it would be self-defea
if the government is unable to control the machinations of foreign
prises and allows the country to dance to their tunes. In other word
state cannot allow a parcel of its power coupled with duty, to be
ferred to corporations which act to the detriment of the people.
(iii) There is therefore an imperative need to re-examine and determi
the state ought to take upon itself to direct by public wisdom, and w
it can leave to individual exertion, and how that individual exercise of
power can be made an accountable and responsible exercise.

II Constitutional exposition of public interest

The core of the directive principles of state policy is that ownership and
control of the material resources of the community shall be so distributed so as
to best subserve the common good3 and that the operation of the economic system
should not result in concentration of wealth in the hands of a few. With the Indian
constitutional mandate, Indian economic activity has to satisfy the demands of
distributive justice and public interest.
The concept of public interest has been examined by the Supreme Court in
Kasturilál v. State ofJammu and Kashmir .4 It was hclcj that what, according to the
founding fathers, constitutes the plainest requirement of public interest is set out
in the directive principles and that they embody, par excellence , the constitutional
concept of public interest. The court further held that every activity of the
government has a public element in it and must be guided by public interest.
Justice Krishna Iyer elucidated the philosophy behind article 39 in State of
Karnataka v. Rangannath Reddy.5 Two quintessential conclusions emerge from
article 39(b) and (c) when they prescribe a futuristic mandate to the state with a
message of transformation of the economic and social order. These are:
First , such change calls for a collaborative effort from all legal institutions
of the system, viz., legislature, judiciary and administrative machinery.
Second and consequentially, loyalty to the high purpose of the Constitution,
viz. y social and economic justice in the context of material want and utter
inequalities on a massive scale, compels the court to ascribe expansive meaning
to the pregnant words used with hopeful foresight, not to circumscribe their
connotation into contradiction of the objectives inspiring the provision.6
In that case, Justice Krishna Iyer interpreted the term 'material resources' in
article 39 as 4 'embracing all the national wealth, not merely natural resources, but
all the private and public sources of meeting material needs, not merely public

3. Art. 39(b).
4. (1980)4 S.C.C.l.
5. A.I.R. 1978 S.C.215.
6. Id. at 250.

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380 JOURNAL OF THE INDIAN IA W INSTITUTE [Vol. 36 : 3

possessions. Everything of value or use in the material world

and the individual being a member of the community, his r
those of the community. To exclude ownership of private resou
of Article 39(b) is to cipherise its very purpose of redistr
way/'7
In other words, the Supreme Court has also recognised the private entity and
its resources to be a parcel of the community's resources, and answerable to the
community's needs.
In Kesavananda Bharati v. State of Kerala* the Supreme Court clearly held
that the directive principles are part of the basic structure of the Constitution and
the state by its act cannot affect that basic structure.
The Constitution, therefore, does envisage a positive role for the state. The
judiciary, however, has laid down that the manner in which this role has' to be
performed is left to the legislature: a matter of policy into which it will not
interfere. The policy of liberalisation, and dismantling of the regulatory frame-
work that has been built over the years, is a matter of policy' which the legislature
is entitled to make. Indian public enterprises, while they have a number of
achievements to their credit, have been accused time and again of corruption and
inefficiency. Privatisation may perhaps be necessary to induce an element of
competitiveness and efficiency. It is necessary to ensure, however, that the
casualty in the process is not 'public interest'. The mandate therefore arising is
that we have to build safeguards to avoid being trampled by the power of private
corporations which are stepping into many of the areas hitherto controlled by the
state.

Ill Liberalisation and public interest

One of the ways of ensuring the element of public interest in any state action,
was by availability of certain rights in the individual against the state. The
Constitution9 confers on the individual certain basic rights enforceable against the
state.

If the ultimate objective is sustainable, (/) utilisation of natural and hum

resources, (//) achievement of higher levels of production and per capita inco
(iii) generation of employment, (iv) reduction of inequalities and ensuring
social and economic justice, we have to develop safeguards against the priva
actors who are stepping in, in a big way, to take over many of the state-ow
enterprises. Such a need is enhanced especially in the light of corporati
emerging globally as major 'actors' by sidelining the 'state'.
The purpose of the Constitution10 as explained by the Supreme Court, is t
the state, in the exercise of its powers should be subjected to limitations o
fundamental rights of individuals.11 The reasoning was that it was only against t

7. Ibid.
8. A.I.R. 1973 S.C. 1461.
9^ Pt. III.
10. Ibid.
11. A.I.R. 1952 S.C. 59.

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1994] LIBERALISATION, PUBUC INTEREST AND INDIAN CONSTITUTION 381

state and its immense power that an individual needs constitutional protection.1
But what are the safeguards available against the 'immense' power of t
corporations? The real question which needs to be addressed is whether th
'private sector' is really 'private' . We are all aware of the fact that the pri
sector is only indulging in private management of public capital. Most of them
recipients of large public funds from public financial institutions and banks. Th
are dealing with money of the public at large. Is there any need, or for that matt
justification, in calling them private?
With the process of economic liberalisation and an increasing role bein
contemplated for private sector and in the absence of any regulatory framewor
it is time that we re-evaluate the concept of public-private divide contempl
by article 12 of the Indian Constitution. If the state action for reasons of presen
of public element in it is subject to certain restrictions contained in the Co
tution,13 (in order to fulfill the mandate of article 14 of the Constitution, whic
guarantees equality before law and equal protection of law) should not
'private' sector, which is only using the corporate veil to shield its public identi
be subjected to the same restrictions which the state is subject to, by piercing t
corporate veil?
What in essence is being proposed is that the ambit of the Constitution,14 an
particularly of article 12 should be expanded in the light of emergenc
corporations as entities with immense power. The emergence of this new jurispr
dence would be an essential and much needed safeguard against their activi
It will not be possible to transpose the positive duty mandated upon the stat
the corporation.15 But what can and should be done is to make private corporati
answerable to constitutional guarantees of fundamental rights. The test b
suggested is that any private entity which holds itself open to the 'public',
'public element' in it and its activities should be made answerable to the gua
tees of fundamental rights. Such a proposition would be in conformity with
fundamental basis of the Indian Constitution: the guarantee of basic rights t
individuals.
The Supreme Court in Shrilekha Vidyarthi v. State of Uttar Pradesh,16
recognise that the presence of 'public element' is sufficient to attract articl
In that case, however, the court maintained the public-private divide in stat
privately controlled activities by stating that private parties are only concerned w
their personal interest, whereas, state action has public interest. The reasoning w
that the state activity affects day-do-day life of members of society and with its
in our economic activity, the impact of this action is also on public interest.
The question arising is, can such a divide be maintained in the light of privat
corporations touching almost every aspect of our lives - in terms of produc
technology, finance, employment and so on? An act of a private corporat

12. Ibid.
13. Pt. III.
14. Ibid.

15. Pt. IV, Directive Principles.

16. A.I.R. 1991 S.C. 537.

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382 JOURNAL OF THE INDIAN LA W INSTITUTE [Vol. 36 : 3

uninformed by reason and influenced by personal predilection

in adverse consequences for the public at large and even
interest.

IV Conclusion

Economic liberalisation is throwing up new challenges to the India

tutional scheme and concept of public interest enshrined thereunder.
The need of the hour is to innovate and protect public interest. Th
is of outmost importance because the concept of fundamental rights
reduced to naught with gradual reduction of the state's activity in differ
of economic life.
Making private corporations answerable to constitutional guarantees is justa
step towards making any private entity affecting public life accountable. Legis-
lative innovations and safeguards beyond that are also necessary if we have to
ensure that another Union Carbide does not slip away by payment of an insignifi-
cant amount deposited infringing on the fundamental constitutional guarantee of
right to life. This is necessary because a private entity is brought to act in its own
interest alone. It is upto the state to ensure that public interest is not injured
thereby. Keynes has observed:

We cannot settle on abstract grounds, but handle on merits in detail, what

Burke termed as one of the finest problems in legislation, namely, to
determine what the State ought to take upon itself to direct by public
wisdom, and what it ought to leave, with as little interference as possible,
to individual exertion.17

Of more significance is his observation:

It is not true that individuals possess a prescriptive natural liberty in their

economic activities. The world is not so governed from above that private
and social interests always coincide. It is not so managed here below, that
in practice they coincide. It is not a correct deduction from the principles
of economics that enlightened self-interest always operates in the public
interest. Nor is it true that self-interest is generally enlightened; more
often individuals acting separately to promote their own ends are too
ignorant or too weak to attain even these. Experience does not show that
individuals, when they make up a social unit, are always less clear-
sighted than when they act separately.18

L Viswanathan*
R.V. Anuradha +*

17. John Maynard Keynes, Essays in Persuasion 112 (1963).

18. Ibid.

* Student, V Year, B.A., LL.B.(Hons.), National Law School of India University,

** Student, IV Year, B.A.. LL.B.(Hous.), National Law School of India University

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